Fraudsters, criminals, drug dealers, dictators, and greedy politicians all use the international global bank network to move their ill-gotten gains around the world. There are agreements between banking authorities in every country to reduce this illegal traffic in funds. Banks are required to set up internal controls, fill out “suspicious activity reports,” and report all transactions above a certain monetary amount to bring compliance with anti-money laundering laws. In 1999, a report by the US Senate Select Subcommittee on Investigations, faulted the global private banking business of Citigroup Inc., the largest US financial services company, for poor due diligence and lax controls. Private-banking officers helped clients such as the president of Gabon, the husband of former African Prime Minister Jerry Ralph and Raul Salinas, the brother of Mexican President Carlos Salinas de Gortari, to hide tens of millions of dollars in suspected corruption proceeds from the authorities in their home countries. (Allen 1999a).
Raul Salinas, brother of then Mexican President Carlos Salinas, was-arrested in early 1995 for the suspected murder of a prominent Mexican politician and suspicion of influence peddling. (In Mexico, Salinas had earned the nickname “Mr. 10 Percent” for his reputed habit of skimming off the top of government contracts with which he was even tangentially involved.) Swiss authorities froze his accounts in that country and seized the money on the grounds that it came from drug-trafficking activities.
Salinas was the client of Amy Elliott, a Citibank executive specializing in banking services for rich Mexicans. Over the three prior years, Salinas had transferred more than $100 million from Mexico into his Citibank account in New York. Yet Elliot had never seriously questioned the source of the funds nor even completed the paperwork required to open such an account. (Lozada, 2002).
In the wake of Mr. Salinas’s arrest, Ms. Elliott says she was “mortified and dismayed” to discover that she had not filled out required background information on her client’s source of funds, despite a series of memos from private-bank executives entreating everyone to comply with such internal procedures. (Allen 1999a).
An internal Citibank audit of the private-banking department in 1996 determined that the department’s priorities centered on serving clients, even if it meant compromising the bank’s internal controls. (Lozada 2002) “It appears that there are no consequences for bad audits – as long as the private bank meets their financial goals,” wrote a Federal Reserve examiner in 1997. (Allen 1999b).

I. Why did Citibank’s non-compliance with banking laws represent a weakness in internal control?
II. What controls were in place but not operating?
III. Why was the established control procedure not followed?